SHANGHAI, Jun. 17 (SMM) – SHFE 1408 zinc contract prices opened at RMB 15,360/mt last Friday evening, then touched RMB 15,445/mt before falling back to RMB 15,355-15,400/mt, and closing at RMB 15,395/mt, flat with settling prices on the previous trading day. Trading volumes decreased by 70,000 lots, and total positions increased by 2,716 lots to 114,000 lots. SHFE 1408 zinc contract prices inched down as a large number of longs left the market but found support from the 10-day moving average, fluctuating between RMB 15,335-15,365/mt, and closing at RMB 15,360/mt, down RMB 35/mt or 0.23%. Trading volumes decreased by nearly 20,000 lots, to 32,000 lots, and total positions decreased by 9,080 lots, to 104,962 lots.
#0 zinc prices were between RMB 15,280-15,310/mt, with spot discounts of RMB 30-60/mt against SHFE 1408 zinc contract prices. #1 zinc prices were between RMB 15,230-15,240/mt. Shuangyan branded #0 prices were around RMB 15,310/mt, and RMB 15,280/mt for Yuguang, Jiulong, Qinxin and Feilong branded #0 zinc and RMB 15,220-15,230/mt for imported #0 zinc. SHFE 1408 zinc contract prices edged down, and SHFE spot-month zinc contract prices fluctuated around RMB 15,250/mt. cargo holders were actively moving goods as the delivery date neared, but downstream buyers took a wait-and-see attitude, leaving transactions muted. Prices for domestic zinc were firm due to tight supply, but the inflow of imported zinc dragged down market prices. SHFE 1408 zinc contract prices leveled out in the afternoon, with #0 zinc prices between RMB 15,280-15,310/mt.
LME zinc prices surged initially before falling back, failing to stand at USD 2,100/mt.
With regard to zinc price trends this week, SMM surveyed 30 market players and found that 40% are pessimistic, believing LME zinc prices will continue to fall, testing support from USD 2,050/mt. China’s probe into financing fraud at the Port of Qingdao, combined with previous RMB depreciation, will continue to depress market confidence and affect base metals prices. Besides, turmoil in Iraq dampened market sentiment. In addition, backwardation of spot zinc against LME three-month zinc contract prices turned to contango of USD 16/mt, which will also weigh down LME zinc prices. In China, the end of high-demand season for zinc and high zinc prices will leave downstream enterprises cautious, which maintain inventories low. As such, SHFE 1408 zinc contract prices will test support from RMB 15,150/mt, with spot zinc prices falling to RMB 15,150/mt.
37% are neutral, believing LME zinc prices will hover between USD 2,065-2,100/mt. Markets expect the US Federal Reserve (Fed) to raise interest rates at its June policy meeting, affecting both the US dollar index and commodity prices. The market will remain cautious before the announcement of the Fed’s policy meeting result on Thursday, and price volatility will rise in the latter half of the week. The start of the World Cup last Friday also dampened market sentiment. SHFE 1408 zinc contract prices will move between RMB 15,250-15,450/mt, with spot discounts of RMB 30-80/mt against SHFE 1408 zinc contract prices.
23% are bullish, thinking LME zinc prices will rise to USD 2,120/mt. Value-added at scale-efficient industries in May rose 8.8%, up 0.1% from April; China’s power generation was up 5.9% in May, higher than the 4.4% in April. Besides, retail sales rose 12.5% YoY, better than April’s. That indicates China’s fine-tuning helped China’s economy stabilize, which will bolster zinc prices. Although the low-demand season for zinc set in, maintenance at smelters including the producers of Shuangyan and Yuguang branded zinc during March-April reduced zinc supply. SHFE 1408 zinc contract prices will test RMB 15,500/mt, with spots discounts around RMB 100/mt.